Our Philosophy: Why Vertical Farms need to think more like Tesla.

Emerging technologies are always ripe with new ideas and investments. While we believe that growth above profit mindset could potentially lead to impressive long-term outcomes, such an approach is ultimately shortsighted. All companies should aim to be good stewards to their staff and the planet while simultaneously maximizing profitability.

We fear that the current vertical farming industry is functioning within a bubble. Companies are being flooded with cash in the hope of long-term market dominance instead of focusing on short-term operations. Since the majority of startups fail within the first ten years, the vertical farming industry may be in trouble. While facility and labor costs may generally be high in our industry, at Cultivato we believe that the secret to success lies in the crops being grown. In this respect, we can learn from the electric automaker, Tesla.

Tesla’s growth and profitability have skyrocketed in recent years largely due to Elon Musk’s operational master plan. Produce high-cost and low-volume luxury cars and gradually transition into affordable, mass-market vehicles. By starting with a luxury product, Tesla was able to accelerate the cost-reduction of core technologies and achieve market dominance.

 

At Cultivato we seek to apply the same approach to vertical farming

  • The current industry focus produces the least expensive crops with the most expensive processes and technologies. A crop like lettuce can cost upwards of $40 a head to produce, yet is being sold to consumers at $4 after retail markups. This is not conducive to long-term growth and presents a significant economic risk.
  • When investors pump the brakes on the steady cash flow that is keeping most vertical farming operations in business, we fear the entire industry is at risk of implosion. Given the increased possibility of an economic downturn, minimizing volatility should be a key consideration.

 

Accelerating the world to a sustainable viticulture farming future.

Category:

Date:

August 31, 2021